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Our latest addition to RotationInvest.com's suite of tools is the Risk On - Risk Off Tool. This tool uses a moving average applied to a fund or the Risk On portfolio to determine which Portfolio (the Risk On or Risk Off) should be invested in. The goal of this tool is to provide a simple way for users to backtest switching between 2 different portfolios using a moving average or 2 moving averages as market timing method.​ This allows the user to select a portfolio for when the stock market is doing well (Risk On), and provide a way to de-invest from this portfolio when the market is doing poorly (Risk Off).

The below example is switching between a simple stock portfolio (50% SPY [S&P 500 ETF], and 50% MDY [Mid-Cap ETF]) in the Risk On portfolio, and a Low risk portfolio for the Risk Off portion comprised of 50% SHY [US Treasury 1-3 Year ETF] and 50% IEF [US Treasury 7-10 Year ETF]. The Risk On portfolio is selected when SPY is above the 175 day moving average, otherwise the Risk Off portfolio is selected. Also we made sure that even when the Risk On portfolio was not selected we kept it's allocation at 30% (so you are not entirely out of the Risk On Portfolio at any time).

Below is the Equity Curve for the strategy:

Below shows the transition map, when each portfolio was chosen. As you can see, since we selected to always have at least 30% of our funds invested in the Risk ON portfolio, the Risk OFF portfolio is only ever invested 70%:

Over the Span of the Backtest this strategy returned 12.12% with a 0.96 Sharpe Ratio, with only 15.3% maximum monthly drawdown:

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Notice: Your use of this site (RotationInvest.com or RotationInvest) is considered equivalent to your signature as evidence of your acceptance of RotationInvest.com's Terms of Use, and Privacy Policy.RotationInvest.com is not a registered investment advisor and does not provide professional financial or investment advice.RotationInvest.com is a tool that produces trade signals and backtesting results according to the set of funds and rules provided for analysis. Any strategies shown including but not limited to the pre-built strategies are only used to highlight what is possible using these tools.